India's public distribution system is faulty: World Bank

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  1. nrj

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    Nov 16, 2009
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    New Delhi - Though India's social sector spending is higher than many other developing countries, one of its flagship welfare programs -- the public distribution system (PDS) -- is fraught with leakages, a World Bank report said Wednesday.

    The PDS scheme, which consumes around one percent of the country's gross domestic product (GDP) and covers upto 25 percent of the poor households, has had limited success, as only 41 percent of the foodgrain released by the government reach their target, the report said.

    'Only 41 percent of the grains released by the government reach households, according to 2004-05 national sample survey (NSS), with some states doing much worse,' the World Bank study said.

    According to the report, apart from leakages, the PDS also suffers from an ill-conceived procurement system.

    The government's policy of minimum support price for farmers too contributes to grain wastage every year.

    'There will continue to be large grain stocks purchased each year, which need to be drawn down,' it said.

    The report recommended that in the medium to long term, the government should consider replacing the system with the option of cash transfer, while continuing food-based support for specific situations like natural disasters.

    'Experience in India and in many other countries have highlighted the benefits of target cash transfer. These diverse experience stress the need for further evaluations and the fact that immediate and medium term solution may vary in different states,' Roberto Zagha, the World Bank's country director for India, told reporters here.

    Zagha gave the examples of states like Bihar and Chattisgarh, which are testing alternate system of food allocation like food stamps and coupons coupled with community participation and robust monitoring of the system.

    The report said that other welfare schemes like Mahatma Gandhi National Rural Employment Guarantee Scheme (MGNREG) has also not fulfilled its promise of 100 days work per rural household, but added that the scheme has had a positive impact on the rural economy.

    The report lauded Rashstriya Swasthya Bima Yojana (RSBY) due to it's positive impact through targeted allocation.

    'A future priority should be to strengthen its capacity to oversee and administer the expansion of the program through the key oversight of a specailised agency,' the report added.


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